Investment suggestion
Haining Picheng announced its 2019 results: total operating income of 1.422 billion yuan, year-on-year-17.04%; return to the mother net profit of 279 million yuan, year-on-year-23.31%, corresponding to 0.22 yuan per share, in line with the previous performance of KuaiBao. At the same time, the 1Q20 results were announced: the total operating income was 268 million yuan,-22.12% compared with the same period last year, and the net profit was 66 million yuan,-32.76% compared with the same period last year. In view of the fact that the company's 2020-21 results are likely to be under continued pressure due to the epidemic and changes in consumer habits, we downgrade our profit forecast and downgrade to neutral for the following reasons:
The revenue end continues to be under pressure. In 2019, the company's total revenue fell from-17.04% to 22.12%, mainly due to the epidemic and the decline in offline retail passenger flow. In terms of business, ① property rental was + 0.91% year-on-year in 2019, basically the same as the previous year; ② stores and supporting properties were-21.86% year-on-year in 2019, dragging down the overall performance; in other ③ businesses, commodity sales in 2019 were-93.55% year-on-year, hotel services were-27.75%, and health care services maintained a rapid growth rate of 163.71%.
The net interest rate has fallen. In 2019, the company's comprehensive gross profit margin of 52.8%, year-on-year + 4.8ppt, we expect to be mainly due to changes in the revenue structure of stores and property sales.
From the cost point of view, the expense rate during 2019 is 18.2%, which is higher than that during the period of-0.3ppt / 1Q20-4.03ppt, mainly due to the limitation of marketing activities during the epidemic, resulting in a reduction in expenditure. Affected by the increase in non-operating expenses and other factors, the net interest rate in 2019 is year-on-year-1.6ppt to 19.6%-3.91ppt to 24.70%. We expect it to be mainly affected by the epidemic, and the subsequent improvement in profitability needs to be observed.
Downgrade to neutral. In the face of external environmental pressure, at this stage, the company consolidates and promotes the main leather industry, extends the development of the fashion industry from the main leather industry, and promotes the layout of the second main industry health industry, but the contribution to performance at this stage is still limited. Taking into account the impact of the epidemic and changes in consumer habits, we expect the company to face some pressure on its fundamentals in the next 1-2 years.
What is the biggest difference between us and the market? We believe that the company's traditional leather leasing business will still be under pressure in the next 1-2 years. Potential catalyst: leather consumption boom continues to decline.
Profit forecast and valuation
Based on the downside risk of performance, we downgrade the earnings per share forecast of 2020 peg by 9% to 0.19 yuan / 0.19 yuan per share in 2021. The current share price corresponds to 2020x20x2021, and the stock price is downgraded to neutral, and the target price is downgraded by 10% to 4.17 yuan. Corresponding to 2020x2021, there is 22 times Pmax E in 2021, and there is 10% room to rise.
Risk.
The fashion and health industry has achieved relatively rapid development.
